How to Interpret the CBO Report

How to Interpret the CBO Report

On January 31, the Congressional Budget Office
(CBO) issued a report entitled Estimated Costs and Technical
Characteristics of Selected National Missile Defense Systems that
could be misinterpreted to suggest that deploying a layered missile
defense system would be far more expensive than it actually would
be. An article on the report appearing in The New York Times on
February 1 demonstrates this point; the article mistakenly
concludes that a layered and deployed ballistic missile defense
program would cost about $238 billion by 2025. This figure is off
the mark for several reasons.

First,
the CBO report lists separately the cost of individual or
stand-alone components--such as a ground-based system and a
sea-based system--that would be used in a layered missile defense
system. It would be wrong to add up all the costs of these
components because the cost of the entire integrated system would
be less than the sum of these parts. There are supporting
subsystems in each of the component parts (such as many of the
sensors, the interceptor, and much of the command and control
infrastructure) that would be streamlined in an integrated and
layered missile defense system. In reality, deploying such a
layered missile defense system is likely to cost only about 3
percent of the annual defense budget ($8 billion to $10 billion
annually, or about 0.38 percent of the 2002 federal budget) and in
most years will require spending far less than that.

The
CBO report actually warns against adding up the cost of component
parts to estimate the total cost of layered missile defense, but
that has not stopped people from doing this. The purpose of the CBO
report--to respond to a specific request from Senators Thomas
Daschle (D-SD), Kent Conrad (D-ND), and Carl Levin (D-MI)--was not
to estimate the cost of a full-fledged and layered missile defense
system, but to estimate the cost of some individual stand-alone
systems as if they were deployed by themselves.

CBO's
AnalysisClarifying what the report actually assessed and what its
findings show is vital to the debate over missile defense.
Specifically, the CBO estimated separate costs for:

A ground-based
midcourse system, with estimates for research,
development, procurement, and operation of one-, two-, and
three-site systems. The CBO also added in the cost of new radar
development, the Space Based Infrared System-Low (SBIRS-Low),
command and control infrastructure, and operations costs through
2015.

A sea-based
midcourse system, including the acquisitions and
operations costs of seven or nine new ships, each armed with 35
interceptors. The estimate also added in the full cost of space-,
sea-, and ground-based support infrastructure, such as new radar
development, the Space Based Infrared System-Low (SBIRS-Low),
command and control, and operations costs through 2015.

A space-based
laser capability, including the acquisition and operations
costs through 2025 for a constellation of 24 laser-capable
satellites.

Though
there certainly was no intent by the CBO to mislead the public, the
fact is that the report can be misinterpreted. To understand what
the CBO report does and does not say about missile defense costs,
it is important to remember that:

CBO did not
forecast the cost of a layered missile defense
architecture. The Senators asked the CBO to assess the
cost of several missile defense components as if they were
developed, deployed, and operated independently, not as a system of
systems. It would have been helpful if CBO had followed through and
estimated the cost of developing and deploying the three missile
defense programs as part of a layered system, especially since that
is the architecture the Administration is likely to pursue.

Adding in the
full cost of support infrastructure to each program unnecessarily
inflates program costs. CBO unnecessarily added billions
of dollars to the cost of each missile defense system by
attributing the full cost of support infrastructure that will not
be used solely for missile defense. Attributing multipurpose
infrastructure to missile defense alone is misleading. For example,
the sea-based option estimate includes the acquisition and
operations costs of seven to nine additional destroyers. The
Heritage Foundation Commission on Missile Defense has argued that a
sea-based option can be achieved by building onto the Navy's
existing Aegis cruisers. If more ships are needed to carry out the
Navy's missions, one of which would be missile defense, the cost of
those new ships should not be attributed to missile defense alone,
as they surely will be used for other missions such as land attack,
fleet defense, and anti-submarine warfare. The same holds true for
SBIRS-Low. In defense budgets today, the cost of SBIRS-Low is
assigned to neither ground-based nor sea-based options; it is
considered a multi-purpose program that will fulfill the
requirements not only of ballistic missile defense, but also of
other general defense needs such as space surveillance and
battlefield awareness.

Adding in the
cost of operations over time is also misleading. The cost
estimates for missile defense should have been limited to the cost
of acquisitions. All options for building a missile defense for
U.S. territory are in the research and development phase. Not only
will support infrastructure for missile defense be used for other
missions, but the operational costs for the systems under
development also may be offset by savings derived from deploying a
smaller strategic nuclear force. This will be true not only for
ships and SBIRS-Low, but also for sensors and command and control
infrastructure. Indeed, much of what is being developed for missile
defense could well provide the foundation for America's
information-intensive military transformation initiative.

ConclusionAccurate assessments of the cost of missile defense can be
made only once a decision is made about the actual architecture the
Administration will pursue. Policymakers should remember that
Americans are willing to pay whatever it takes to defend the
homeland against missile attack. The costs of remaining vulnerable
to even one successful missile strike far exceed the costs of
deploying missile defense, which is more affordable than critics
contend.

Baker Spring is
F. M. Kirby Research Fellow in National Security Policy and Jack
Spenceris Policy Analyst for Defense and National
Security, in the Kathryn and Shelby Cullom Davis Institute for
International Studies at The Heritage Foundation.